AB InBev in talks to buy remainder of Grupo Modelo

Bottles of Grupo Modelo beer sit on a shelf in Mexico City, Mexico, on Monday.

Warning: Excessive consumption of alcohol can damage your health

Photo: Bloomberg

Anheuser-Busch InBev SA’s interest in buying the rest of Mexico’s Grupo Modelo on Monday warmed investors eager to see fresh consolidation in the global beer market.

Shares of both brewing giants rose after Modelo and Belgian-based AB InBev, which has a 50.4 percent non-controlling stake in the Mexican company, said on Monday they were discussing expanding their joint relationship.

Fueled by Mexico’s growing beer market, AB InBev could unlock big cost savings and give the company control of exports of Corona beer, the No. 1 imported brand in the US.

The deal, which would follow a series of recent mergers in the industry, could be worth well over US$10 billion, though the family-controlled Mexican brewer said nothing was set in stone.

“These talks may or may not result in the consummation of a deal and any speculation on the terms and conditions is premature,” Modelo said in a statement.

An agreement would give Anheuser-Busch InBev, the world’s largest brewer, access to the Mexican beer market, which is growing by between 2 percent and 3 percent a year.

Mexico is the world’s sixth-biggest beer market and the fourth-most profitable, and is a virtual duopoly between No. 1 player Modelo and Heineken.

In terms of volume, Modelo is the world’s seventh-biggest brewer, according to independent researcher Plato Logic.

Modelo shares jumped 19.3 percent to close at 116.87 pesos (US$8.37) on Mexico’s stock exchange, while AB InBev shares closed up 2 percent at 56.75 euros, making them the biggest gainer in the FTSEurofirst 300 index of leading European shares.

Banking sources said the two sides were in intensive talks, but the sticking point was the size of the premium the Modelo families can extract from AB InBev.

“The families are willing to sell, but they want a big price as they see a big boost for AB InBev from owning 100 percent of Modelo,” one banker close to the talks said.

The deal would be the latest in a string of changes in the global brewing industry as companies seek growth in emerging markets and look to make big savings in procurement and distribution.

In April, AB InBev agreed to buy the Dominican Republic’s Cerveceria Nacional Dominicana for more than US$1.2 billion, while in the same month, Molson Coors bought East European brewer StarBev for 2.65 billion euros (US$3.5 billion), and last year SABMiller purchased Foster’s for US$11.8 billion.